Zomato share price has tanked more than 41% so far this year to Rs 80.35 per share, just shy of its IPO price. The fall in stock price has come on the back of global factors such as rising interest yields, inflation, and also the company’s reluctance to host analyst/investor interactions, analysts said. Although the stock has nosedived, brokerage firm JM Financial remains positive on the long-term growth story of Zomato. JM Financial has reiterated a buy call on Zomato stock with a target price of Rs 140 per share. Similarly, Sachin Shah, Fund Manager, Emkay Investment Managers told FinancialExpress.com that Zomato is a “win-win-win solution”.
Long term growth story in tact
“We remain bullish on Zomato’s long-term growth prospects as they are well-positioned to benefit from robust industry tailwinds such as improving tech penetration and rising income share of digitally native millennials/GenZ,” JM Financial said in a report. The brokerage firm expects Zomato to deliver ~36% GOV growth (~4x of total food services) during the next five years. This growth will be aided by increase in orders post-covid even for organised bigger restaurants. JM Financial expects restaurants with inhouse delivery fleets to pass on their direct channel orders to food-techs due to cost efficiency.
Zomato is seen to have a largely untapped market and a potential of a large growth in users. India is expected to have around 110 million households by 2025 with an annual income of more than Rs 5.5 lakh. Majority of these will be urban, adding to the opportunity ahead for Zomato. Although the growth is expected to be strong it is still estimated to be slower than what was seen in China and the US. “We believe that food-techs’ growth in India is likely to be much slower than that achieved by platforms in the US and China. This is largely due to significant differences in addressable market size, disposable income levels, cultural habits and tech penetration levels in these countries,” the report added.
Best among new-age tech?
From all the recently listed new-age internet companies, Sachin Shah sees Zomato as a firm that has the right ingredients to win. “The business offers a Win-Win-Win solution to the needs of consumers, Manufacturer (Restaurants) and Supplier (Zomato),” he added. The food delivery market has expanded as customers take up new habits. “We believe that Zomato aiming to transform the eating habits of the large Indian consumer base has a huge runway for a high and profitable growth in the years to come,” he added.
Strong upside potential
JM Financial expects the stock to surge to Rs 140 per share, an upside potential of 74% from today’s intraday low. Analysts at JM Financial have cut the target price to Rs 140 from Rs 155 earlier. Zomato is currently sitting just 5% away from its IPO price of Rs 76 per share. So far this year the stock has tanked more than 40%, mirroring the move charted by other new-age tech stocks across the globe.